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SEB Signs Strategic Financing Transaction for $20,000,000

MISSISSAUGA, Ontario, Nov. 05, 2019 (GLOBE NEWSWIRE) -- Smart Employee Benefits Inc. (“SEB” or the “Company”) (SEB.V) a leader in benefits processing solutions and services today announced that it has entered into a term sheet for a non-brokered financing to raise proceeds of $20,000,000 (the “Financing”) by way of a private placement of a convertible debenture (the “Debenture”).  The Financing is being provided by a large strategic investor (the “Strategic Investor”).  The proceeds of the Financing will be used to repay all term indebtedness of the Company as well as for general working capital purposes. 

States John McKimm, President/CEO/CIO of Smart Employee Benefits Inc., "Scotiabank was engaged in March, 2019 to assist the Company in reviewing strategic opportunities for the Company.  A fitting and complementary Strategic Investor has now been identified. The term sheet described in this news release provides the Strategic Investor with the ability to make a significant strategic investment in SEB. Both parties are working diligently to close the transaction expeditiously. Further details will be provided on signing of the definitive closing documents for this Financing transaction."

Terms of The Financing
The Debenture will have an interest rate of 10% per annum, paid semi-annually, with the principal payment due at the maturity date (the “Maturity Date”), being 60 months after the date the Financing is completed (the “Closing Date”).  The interest rate may be reduced to a floor of 7% depending on the success of select business initiatives.

The principal amount of the Debenture will be convertible into common shares of the Company (“Shares”) at a conversion price of $0.25 per Share (the “Conversion Price”), representing approximately a 30% premium to the closing trading price of the Shares based on the three day weighted average prior to the date that the price reservation form was filed with the TSX Venture Exchange (the “Exchange”).

The Debenture will be convertible at the option of the holder, at any time prior to the close of business on the last business day immediately preceding the Maturity Date. If the volume weighted average trading price of the Shares on the Exchange is equal to at least 175% of the Conversion Price for a period of 30 trading consecutive days, then the Debenture will be convertible at the option of the Company.

The Debenture will be guaranteed by the material subsidiaries of the Company (the “Guarantors”) and secured by first ranking security over all undertaking, property and assets of the Company and of each Guarantor, which security is expected to be subject only to a first ranking security over the insured accounts receivable and cash of the Company in favour of an operating facility lender.  Concurrently with finalizing the terms of the Financing with the Strategic Investor, the Company will also be negotiating a new operating credit facility with an operating facility lender, and such lender and the Strategic Investor will enter into an intercreditor agreement governing the relationships with the Company and vis a vis each other.

The Debenture will not be redeemable at the option of the Company during the first three years from closing (the “Call Date”). In year four (i.e. after the Call Date and prior to December 1, 2023), the Debenture may be redeemed in whole or in part from time to time at the option of the Company, at a price equal to the principal amount plus accrued and unpaid interest thereon up to but excluding the date of redemption, provided that the volume weighted average trading price of the Shares on the Exchange during the 30 consecutive trading days preceding the date on which notice of redemption is given is not less than 125% of the Conversion Price. Provided, however, that if the Company delivers such written notice, the Strategic Investor shall have 10 days to convert the Debenture into that number of Shares as are equal to the principal amount of such Debenture divided by the Conversion Price. In year five (i.e. after December 1, 2023), the Debenture will be redeemable at the Company’s option at any time at par plus accrued and unpaid interest (provided, however, that the same 10-day notice shall apply to allow for the conversion at the option of the Strategic Investor).

On a change of control of the Company (a “Change of Control”), the Company shall notify the Strategic Investor of the Change of Control in writing, and the Strategic Investor shall, in its sole discretion, have the right to require the Company to, either: (i) purchase the Debenture at 125% of the principal amount thereof plus unpaid interest until the second anniversary of the issue date and following the second anniversary “125%” becomes “101%” until the Maturity Date; or (ii) convert the Debenture at the Conversion Price.

Pursuant to an investor rights agreement customary for transactions of this nature to be entered into on the Closing Date, the Strategic Investor will have the right to have two nominees appointed to the board of directors of the Company, including, one member on each of the audit committee and the governance and compensation committee of the Company. The Strategic Investor will also have the right to license the Company’s technology and intellectual property on commercial terms.

The policies of the Exchange require that any new Control Person (as defined under Exchange policies e.g. a holder of more than 20% of the outstanding voting shares of an issuer) requires shareholder approval.  Exchange policies also provide that shareholder approval may be obtained by written shareholder consent. 

The Company intends to obtain the written consent of holders of a majority of the Shares for the Financing and creation of the Strategic Investor as a new Control Person, which will enable the Company to move effectively to close the Financing and save costs over calling and holding a special meeting of shareholders for such purpose.  To avoid selective disclosure during the process of obtaining shareholder approval by written consent pursuant to Exchange policies, the Company is issuing this comprehensive press release about the Financing.

There are currently 165,760,699 Shares issued and outstanding.  The Strategic Investor currently does not own or control any Shares; however, if the Strategic Investor were to convert the principal amount of the Debenture to be issued to it pursuant to the Financing, then the Strategic Investor would beneficially own or control, directly or indirectly, 80,000,000 Shares, representing approximately 32.6% of the then 245,760,699 issued and outstanding Shares. 

In addition to consent from the Company’s shareholders, completion of the Financing is subject to, among other things, approval of the Exchange and the execution of final definitive documentation.  The Company is targeting to close the Financing on or about mid-November; however, there is no assurance that the Financing will be completed at that time, or at all.

About SEB
SEB is a technology company providing Business Process Automation and Outsourcing software, solutions and services to a national and global client base. SEB has a specialty growth focus in cloud enabled SaaS processing solutions for managing employer and government sponsored health benefit plans on a BPO (Business Processing Outsourcing) business model, globally. SEB currently serves corporate and government clients across Canada and internationally. Over 80% of SEB’s revenues derive from government, insurance and health care organizations. SEB’s technology infrastructure of over 650 multi-certified technical professionals, across Canada and globally, is a critical competitive advantage in supporting the implementation and management of SEB’s benefits processing solutions into client environments. SEB’s Benefits Processing Solutions can be game changing for SEB clients.

The core expertise of SEB is automating and managing business processes utilizing SEB proprietary software solutions combined with solutions of third parties through joint ventures and partnerships. SEB’s client acquisition model in benefits processing is “Channel Partnerships” where SEB processing solutions both improve cost structures and enable new revenue models for Channel Partners and clients. All SEB solutions are cloud enabled and can be delivered on a SaaS platform. SEB solutions turn cost centers to profit centers for our Channel Partners.

Neither TSX Venture Exchange Inc. nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

This news release does not constitute an offer to sell or a solicitation of an offer to sell any of the securities described herein in the United States.  The securities described in this news release have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Forward Looking Information
The statements made in this release that are not historical facts contain forward-looking information that involves risks and uncertainties. All statements, including statements regarding the Company’s areas of focus, other than statements of historical facts, which address the Company’s expectations, should be considered as forward-looking statements and therefore subject to various risks and uncertainties. The words “may”, “will”, “could”, “should”, “would”, “suspect”, “outlook”, “believe”, “plan”, “anticipate”, “estimate”, “expect”, “intend”, “forecast”, “objective”, “hope”, “target” and “continue” (or the negative thereof), and words and expressions of similar import, are intended to identify forward-looking statements.

Such forward-looking statements are based on knowledge of the environment in which the Company currently operates, but because of the factors listed herein, as well as other factors beyond the Company's control, actual results may differ materially from the expectations expressed in the forward-looking statements. Investors are cautioned not to put undue reliance on forward-looking statements. The Company undertakes no obligation, and does not intend, to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of any unanticipated events, other than as required by applicable law.

For further information about SEB, please visit www.seb-inc.com.

All figures are in Canadian dollars unless otherwise stated.

MEDIA AND INVESTOR CONTACTS:
John McKimm
President/CEO/CIO
Office (888) 939-8885 x 2354
Cell (416) 460-2817
john.mckimm@seb-inc.com